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on Payment Systems and Financial Technology |
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Issue of 2021‒05‒03
nineteen papers chosen by |
| By: | Jonathan Chiu; Tsz-Nga Wong |
| Abstract: | Digital platforms, such as Alibaba and Amazon, operate an online marketplace to facilitate transactions. This paper studies a platform's business model choice between accepting cash and issuing tokens, as well as the implications for welfare, resiliency, and interoperability. A cash platform free rides on the existing payment infrastructure and profits from collecting transaction fees. A token platform earns seigniorage, albeit bearing the costs of setting up the system and holding reserves to mitigate the cyber risk. Tokens earn consumers a return, insulating transactions from the liquidity costs of using cash, but also expose them to the remaining cyber risk. The platform issues tokens if the interest rate is high, the platform scope is large, and the cyber risk is small. Unbacked floating tokens with zero transaction fees or interest-bearing stablecoins can implement the equilibrium business model, which is not necessarily socially optimal because the platform does not internalize its impacts on off-platform activities. The model explains why Amazon does not issue tokens but Alipay issues tokens circulatable outside its Alibaba platforms. Regulations such as a minimum reserve requirement can reduce welfare. |
| Keywords: | Digital currencies and fintech; Monetary policy; Payment clearing and settlement systems |
| JEL: | E5 L5 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:21-19&r= |
| By: | Chen, Yi-Hsuan; Vinogradov, Dmitri V. |
| Abstract: | Cryptocurrencies come with benefits, such as anonymity of payments and positive network effects of user adoption, and transaction risks including unconfirmed transactions, hacks, and frauds. They compete with central-bank-regulated money but consumers may prefer one currency over the other. In our arbitrage-free world utility from consumption depends on benefits, which are governed by distinct stochastic processes, implying incomplete markets and distinct pricing kernels. We characterize the cryptocurrency kernels, evaluate the otherwise unobservable benefits, and show their contribution to pricing. The model explains both the co-existence of the two currencies and the high volatility of the cryptocurrency price. |
| Keywords: | Bitcoin,cryptocurrency,pricing kernel,currency competition |
| JEL: | A1 D0 E21 G12 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:irtgdp:2021006&r= |
| By: | Alexandra Mitschke (University of Paderborn) |
| Abstract: | In consequence of the progressive digitalization and declining trend of cash- usage in payments, the majority of central banks is currently researching the topic of Central Bank Digital Currencies (CBDCs). Since 2020, the ECB is preparing a review into whether to issue a digital complement to physical cash and central bank deposits, the so-called digital euro. This study investigates its potential impact on the transmission of monetary policy. We fiÂ…rst survey and interpret key properties of money and money-like assets in the current monetary framework, which motivates a discussion of the proposed forms of CBDCs and the digital euro. Against this background, we extend and close the arbitrage model of Meaning et al. (2018) to investigate the effect of CBDCs on the effectiveness of monetary policy transmission and the ability of the banking sector to fulÂ…fil regulatory liquidity requirements. We conclude that monetary policy would be effective following the introduction of interest-bearing CBDCs, potentially reinforcing the mechanism. Further, we confiÂ…rm that an increase in non-pecuniary benefiÂ…ts of holding bank deposits in relation to CBDCs can mitigate the risk of a potential disintermediation of the banking sector. |
| Keywords: | Central Bank Digital Currencies, Monetary System, Monetary Policy |
| JEL: | E41 E42 E52 E58 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:pdn:dispap:74&r= |
| By: | Maria Mercanti-Guérin (IAE Paris - Sorbonne Business School) |
| Abstract: | The objective of this exploratory research is to investigate a mode of purchasing, social commerce and its main target, e-shoppers. Social commerce can take different forms: F-commerce, grouped purchases or discounts. Nevertheless, the best way to monetize social media remains the possibility to incite Internet users to promote the products or promotions obtained by their friends. Recommendations coming from friends are the main lever to create interactions between consumers, interactions centered on the purchase. However, many questions remain unanswered, especially regarding social acceptance and the real effectiveness of this type of promotion. In one study conducted on the "La Redoute" brand, we examined the extent to which our sample of women is likely to accept social shopping and, in particular, the product or service recommendations of their friends on their wall. |
| Keywords: | social commerce,routes of persuasion,branding,recommendations,Facebook Commerce,F-commerce |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03204816&r= |
| By: | Javier Suarez-Alvarez |
| Abstract: | Digital technologies have changed how people interact with information. PISA data shows that 15-year-olds increasingly read online to fulfil information needs (e.g. online news versus newspapers). At the same time, technological changes in the digitalisation of communication continue to reshape people’s habits (e.g. chats online versus emails). Fifteen-year-olds’ total online consumption has risen from 21 hours a week in PISA 2012 to 35 hours per week in PISA 2018 – almost the equivalent of an average adult workweek in OECD countries. The massive information flow that characterises the digital era demands that readers be able to distinguish between fact and opinion, and learn strategies to detect biased information and malicious content such as phishing emails or fake news. |
| Date: | 2021–05–04 |
| URL: | http://d.repec.org/n?u=RePEc:oec:eduddd:113-en&r= |
| By: | Catia Batista (Nova School of Business and Economics, CReAM, IZA and NOVAFRICA); Pedro C. Vicente (Nova School of Business and Economics, BREAD, and NOVAFRICA) |
| Abstract: | Rural areas in sub-Saharan Africa are typically underserved by financial services. We measure the economic impact of introducing mobile money for the first time in rural villages of Mozambique using a randomized control trial. This intervention led to consumption smoothing through increased transfers as a response to both geo-referenced village-level floods and household-level idiosyncratic shocks. Importantly, we find that the availability of mobile money increased migration out of rural areas, where we observe lower agricultural activity and investment. Our work illustrates how financial inclusion can accelerate African urbanization and structural change while improving welfare in rural areas. |
| Keywords: | mobile money, migration, remittances, technology adoption, insurance, consumption smoothing, investment, savings, Mozambique, Africa. |
| JEL: | O12 O15 O16 O33 G20 R23 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:crm:wpaper:2116&r= |
| By: | Oh, Eun Young (University of Portsmouth); Rosenkranz, Peter (Asian Development Bank) |
| Abstract: | To explore the determinants of peer-to-peer (P2P) lending expansion, this study examines factors that impact P2P lending using a sample of 62 economies over the period 2015–2017. We investigate the effects of financial development and financial literacy on the expansion of P2P lending. The level of development of financial institutions is assessed by access, efficiency, and depth. We find that financial institutions’ efficiency, financial literacy, and lower branch and ATM penetration are positively related with the expansion of P2P lending. This finding suggests that P2P lending can fill funding gaps in economies where traditional financial institutions may be less available, and thus promote financial inclusion. We also find that better information technology infrastructure and high new business density are positively associated with the expansion of P2P lending, suggesting that physical infrastructure is an essential prerequisite for it, while this is more likely to happen in dynamic business environments. |
| Keywords: | financial development; financial literacy; fintech; peer-to-peer lending |
| JEL: | E51 G23 G53 N20 O33 |
| Date: | 2020–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbewp:0613&r= |
| By: | Henri Isaac (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | The digital universe has developed so rapidly that the issue of trust may seem secondary. However, as uses diversify, behaviors are eroding trust in this space (fraud, identity theft, cyberstalking). In addition, the massive collection of personal data by digital services raises questions. Moreover, cybercrime and state surveillance of communications also hamper online trust. Therefore, such a space questions the mechanisms that produce and maintain trust. If these trust mechanisms initially imitated traditional mechanisms, the digital universe has gradually produced its own mechanisms for generating and managing trust, based on the nature of its own characteristics, the network organization and data processing. From then on, the architecture of the trusted third party, whatever its modality, is itself questioned and leads to the idea that a network architecture, by design, by itself, can generate trust in exchanges. |
| Abstract: | L'univers numérique s'est développé si rapidement que la question de la confiance peut paraître secondaire. Cependant, à mesure que les usages se diversifient, des comportements viennent amoindrir la confiance en cet espace (fraude, usurpation d'identité, cyberharcèlement). En outre la collecte massive de données personnelles opérée par les services numériques interpelle. Par ailleurs, la cybercriminalité, la surveillance étatique des communications entravent également la confiance en ligne. Dès lors, un tel espace interroge les mécanismes qui produisent et entretiennent la confiance. Si ces mécanismes de confiance ont dans un premier temps imité les mécanismes classiques, l'univers numérique a progressivement produit des mécanismes de génération et de gestion de la confiance propres, en s'appuyant sur la nature de ce qui le caractérise, l'organisation réticulaire et le traitement des données. Dès lors, l'architecture du tiers de confiance, quelle qu'en soit sa modalité, pose elle-même question et débouche sur l'idée qu'une architecture de réseau, par conception, par elle-même, peut générer la confiance dans les échanges |
| Keywords: | tiers de confiance,fraude,pair-à-pair,labels,certificat,blockchain |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03163289&r= |
| By: | Christian Haddad; Lars Hornuf |
| Abstract: | We study the impact fintech startups have on the performance and the default risk of traditional financial institutions. We find a positive relationship between fintech startup formations and incumbent institutions’ performance for the period from 2005 to 2018 and a large sample of financial institutions from 87 countries. We further analyze the link between fintech startup formations and the default risk of traditional financial institutions. Fintech startup formations decreases stock return volatility of incumbent institutions and decreases the systemic risk exposure of financial institutions. Our findings indicate that the development of fintech startups should be monitored very closely by legislators and financial supervisory authorities, because fintechs not only have a positive effect on the financial sector’s performance, but can also improve financial stability relative to the status quo. |
| Keywords: | fintech, bank performance, default risk, financial stability |
| JEL: | K00 L26 O30 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9050&r= |
| By: | Utz Weitzel (Vrije Universiteit Amsterdam); Michael Kirchler (University of Innsbruck) |
| Abstract: | Financial misbehavior is widespread and costly. The Dutch government legally requires every employee in the financial sector to take a Hippocratic oath, the so-called ``banker's oath.'' We investigate whether moral nudges that directly and indirectly remind financial advisers of their oath affect their service. In a large-scale audit study, professional auditors confronted 201 Dutch financial advisers with a conflict of interest. We find that when auditors apply a moral nudge, referring to the banker's oath, advisers are less likely to prioritize bank's interests. In additional prediction tasks, we find that Dutch regulators expect stronger effects of the oath than observed. |
| Keywords: | experimental finance, audit study, banker’s oath, moral nudges, financial advice |
| JEL: | C92 D84 G02 G14 |
| Date: | 2021–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20210032&r= |
| By: | Zucker Marques, Marina |
| Abstract: | The scholarly debate on currency internationalization focuses on country characteristics and policies as the main determinants in currency competition. However, this literature has neglected the fact that, given the intertwined nature of the international monetary system, other countries' actions and the functioning logic of international finance can also impact a currency's international status. This article shows that RMB usage has been boosted not only by Chinese statecraft but also by economic actors' recent difficulties in using the dollar. The American financial sanctions against Chinese trade partners, the cyclical instability of international finance, as well as peripheral countries' low inflows of dollars have encouraged firms and banks to use the renminbi as an alternative to the dollar. In addition to contributing to a broader understanding of the drivers of currency internationalization, this article proposes a model that explains the mechanisms that push firms and banks away from the incumbent international currency. I posit that changes in domestic and international conditions influence currency transaction costs, thereby propelling economic actors to increase their use of currencies with relatively lower transaction costs. Interviews with Chinese senior officials from the PBOC and the Ministry of Commerce, manufacturing companies, and bank staff are the main primary sources for this article. I triangulate this information with news reports and speeches both in Chinese and English. |
| Keywords: | international monetary system,renminbi internationalization,financial statecraft,dollar,currency competition |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fubsbe:20219&r= |
| By: | Wolfgang Kerber (University of Marburg); Karsten K. Zolna (University of Marburg) |
| Abstract: | Can competition law also take into account effects on privacy or should privacy concerns of data-collecting behaviour only be dealt with by data protection law? In this paper we are analysing the German Facebook case, in which certain terms of service (that force consumers to give consent for merging personal data collected through Facebook services with those collected from tracking and third-party websites) were prohibited as exploitative abuse of a dominant firm. We show from an economic perspective that due to the simultaneous existence of two market failures (market dominance, information and behavioral problems) and complex interaction effects between both market failures and both policies in digital markets, the traditional approach of a strict separation of both policies is not possible any more, leading to the need for more collaboration and alignment of both policies. With respect to the substantive question of protecting a minimum level of choice options for consumers regarding personal data vis-a-vis dominant digital platform firms, the recent decision of the German Federal Court of Justice in the Facebook case and the proposed Digital Market Act have opened new perspectives for dealing with privacy concerns in competition law and regulation. |
| Keywords: | competition law, Facebook, digital platforms, privacy, data protection law |
| JEL: | K21 K24 L40 L50 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:202114&r= |
| By: | Zinovyev, Elizaveta; Reule, Raphael C. G.; Härdle, Wolfgang |
| Abstract: | Smart Contracts are commonly considered to be an important component or even a key to many business solutions in an immense variety of sectors and promises to securely increase their individual efficiency in an ever more digitized environment. Introduced in the early 1990's, the technology has gained a lot of attention with its application to blockchain technology to an extent, that can be considered a veritable hype. Reflecting the growing institutional interest, this intertwined exploratory study between statistics, information technology, and law contrasts these idealistic stories with the data reality and provides a mandatory step of understanding the matter, before any further relevant applications are discussed as being "factually" able to replace traditional constructions. Besides fundamental flaws and application difficulties of currently employed Smart Contracts, the technological drive and enthusiasm backing it may however serve as a jump-off board for future developments thrusting well in the presently unshakeable traditional structures. |
| Keywords: | Cryptocurrency,Smart Contract,Ethereum,CRIX |
| JEL: | G02 G11 G12 G14 G15 G23 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:irtgdp:2021004&r= |
| By: | Felix Ward (Erasmus University Rotterdam); Yao Chen (Erasmus University Rotterdam); Nuno Palma (University of Manchester) |
| Abstract: | How did the Spanish money supply evolve in the aftermath of the discovery of large amounts of precious metals in Spanish America? We synthesize the available data on the mining of precious metals and their international flow to estimate the money supply for Spain from 1492 to 1810. Our estimate suggests that the Spanish money supply increased more than ten-fold. Viewed through the equation of exchange this money supply increase can account for most of the price level rise in early modern Spain. |
| Keywords: | early modern period, equation of exchange, quantity theory of money |
| JEL: | E31 E51 N13 |
| Date: | 2021–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20210033&r= |
| By: | Häusler, Konstantin; Härdle, Wolfgang |
| Abstract: | This paper sheds light on the dynamics of the cryptocurrency (CC) sector. By modeling its dynamics via a stochastic volatility with correlated jumps (SVCJ) model in combination with several rolling windows, it is possible to capture the extreme ups and downs of the CC market and to understand its dynamics. Through this approach, we obtain time series for each parameter of the model. Even though parameter estimates change over time and depend on the window size, several recurring patterns are observable which are robust to changes of the window size and supported by clustering of parameter estimates: during bullish periods, volatility stabilizes at low levels and the size and volatility of jumps in mean decreases. In bearish periods though, volatility increases and takes longer to return to its long-run trend. Furthermore, jumps in mean and jumps in volatility are independent. With the rise of the CC market in 2017, a level shift of the volatility of volatility occurred. |
| Keywords: | Cryptocurrency,SVCJ,Market Dynamics,Stochastic Volatility |
| JEL: | C51 C58 G15 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:irtgdp:2021007&r= |
| By: | Elodie Juge (emlyon business school); Anissa Pomiès; Isabelle Collin-Lachaud |
| Abstract: | Des recherches récentes explorent ce que les plateformes digitales font et font faire aux utilisateurs. Dans leur prolongement, cet article étudie comment les plateformes digitales P2P accélèrent les activités marchandes, et comment cette accélération modèle les relations entre utilisateurs. Une étude qualitative à caractère ethnographique a été menée au sein du marché des vêtements d'occasion de 2013 à 2020. En mobilisant la théorie de l'accélération sociale, nous montrons que les affordances des plateformes digitales encouragent une accélération du rythme de vie, une accélération du renouvellement des objets possédés, et une accélération technique multi-domaines. Ces formes d'accélération aboutissent à une concurrence par la rapidité entre utilisateurs : chacun d'eux se doit d'être plus réactif, plus à la pointe, et plus averti que les autres. De plus, les plateformes constituent un espace digital particulier qui invite à repenser l'aliénation sous plusieurs formes, et notamment l'aliénation par rapport à l'espace et par rapport au temps. Outre ses contributions théoriques, cette recherche offre des contributions sociétales visant à faire prendre conscience aux utilisateurs de l'ampleur de leurs activités marchandes accélérées sur les plateformes digitales. |
| Keywords: | accélération,concurrence par la rapidité,contributions sociétales,P2P,plateformes digitales |
| Date: | 2021–04–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03202568&r= |
| By: | Suesse, Marvin (Trinity College Dublin); Wolf, Nikolaus (HU Berlin and CEPR) |
| Abstract: | What determines the development of rural financial markets? Starting from a simple theoretical framework, we derive the factors shaping the market entry of rural microfinance institutions across time and space. We provide empirical evidence for these determinants using the expansion of credit cooperatives in the 236 eastern counties of Prussia between 1852 and 1913. This setting is attractive as it provides a free market benchmark scenario without public ownership, subsidization, or direct regulatory intervention. Furthermore, we exploit features of our historical set-up to identify causal effects. The results show that declining agricultural staple prices, as a feature of structural transformation, leads to the emergence of credit cooperatives. Similarly, declining bank lending rates contribute to their rise. Low asset sizes and land inequality inhibit the regional spread of cooperatives, while ethnic heterogeneity has ambiguous effects. We also offer empirical evidence suggesting that credit cooperatives accelerated rural transformation by diversifying farm outputs. |
| Keywords: | microfinance; credit cooperatives; rural transformation; land inequality; prussia; |
| JEL: | G21 N23 O16 Q15 |
| Date: | 2019–12–04 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:207&r= |
| By: | Britta Hoyer (Paderborn University); Dirk van Straaten (Paderborn University) |
| Abstract: | Customer reviews are a fundamental part of online markets to establish trust between customers and sellers. Sharing experiences about products and services, however, is accompanied with the (sometimes involuntary) sharing of personal information. This is in conflict with growing concerns of data security calling for more privacy in online settings. Anonymous reputation systems could be one instrument to ensure more privacy in such markets. However, the impact of anonymity on the propensity to leave reviews is unclear. In this experimental study we therefore analyze whether the degree of anonymity of customers affects their propensity to leave reviews in an online market. We find that the amount of ratings drops significantly when subjects are anonymous pointing to self-expression as a driver of customer reviews. Moreover, we find that altruistic subjects are not affected by the introduction of anonymity and, hence, provide significantly more reviews compared to non-altruists under anonymity. When we remove the veil of anonymity, this difference between altruists and non-altruists disappears and, overall, market outcomes increase. |
| Keywords: | Customer Rating, Altruism, Public Good, Anonymity, Reputation |
| JEL: | C91 D64 H41 L86 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:pdn:dispap:70&r= |
| By: | Arthur Lewbel (Boston College); Xi Qu (Shanghai Jiao Tong University); Xun Tang (Rice University) |
| Abstract: | We consider estimation of peer effects in social network models where some network links are incorrectly measured. We show that if the number of mismeasured links does not grow too quickly with the sample size, then standard instrumental variables estimators that ignore the measurement error remain consistent, and standard asymptotic inference methods remain valid. These results hold even when measurement errors in the links are correlated with regressors, or with the model errors. Monte Carlo simulations and real data experiments confirm our results in finite samples. These findings imply that researchers can ignore small amounts of measurement errors in networks. |
| Keywords: | Social networks, Peer e§ects, MisclassiÖed links, Missing links, Mismeasured network |
| JEL: | C31 C51 |
| Date: | 2021–04–28 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:1031&r= |